Ecofibre has reported a pre-tax loss of almost A$25 million in the first half of the 2023 financial year after booking an impairment charge of $12.2m for assets in its Ananda Health and Hemp Black divisions.
The write-offs, totalling $6.5m and $5.7m respectively, follow Ecofibre’s decision to close one production line of its Hemp Black operation, while reflecting reduced CBD extraction at its facility in the US.
Pre-tax losses for the previous corresponding period were $9.6m.
The impairment charges follows the completion of a strategic review with the firm set to “refocus around a tighter set of activities that can generate positive cash flow in the near term and have significant growth potential over time”.
Among cash saving measures introduced by the company are a halt on dried flower purchases for its US-focused Ananda Health CBD operation and the planting of smaller seeds crops.
“Those businesses can draw down on existing crop inventories,” Ecofibre said in its financial report.
Revenue in the six months climbed 6% to $16.5m, but operating expenses jumped 11% to $20.4m, a result of higher staff costs and increased R&D investment.
Its Australia-based Ananda Food operation saw revenues fall 7% to $1.9m as record sales of planting seeds ($1m) were more than offset by falling food sales, particularly through Woolworths.
Meanwhile, Ananda Health reported a 3% revenue increase to $6.8m, helped in part by a $400,000 increase in sales of CBD medicinal cannabis in Australia.
The company said its performance in the US continues to be hit by the “difficult” CBD market which is “forecast to decline over the next few years”.
“Despite hemp-derived CBD being federally legal since December 2018, the FDA (US Food and Drug Administration) has not yet established these products as a dietary supplement or food,” Ecofibre said. “Because of this lack of clarity, products containing hemp-derived CBD have limited access to mainstream retail distribution channels.”
While pre-tax losses climbed 41% to $12.6m excluding the impairment charge, Ecofibre continues to be well-funded with available cash of $12.7 as at December 31.
The company said it is continuing to evaluate a follow-up crossover trial for an over-the-counter CBD medicine following an initial study which failed to deliver a positive result.
